FASB Reconsiders Contractual Sale Restrictions (ASU 2022-03): What the Proposal Means for Locked Token Valuations

The July 2026 proposal reinforces a market-participant approach that Houlihan Capital has applied to cryptoasset portfolios for years 

Executive Takeaway 

In 2022, the FASB issued ASU 2022-03, concluding that a contractual restriction on the sale of an equity security should not reduce fair value when the restriction is viewed as a characteristic of the holder rather than the security. Although the guidance did not explicitly address cryptoassets, its no-discount conclusion logic was repurposed by the industry and applied toward post-TGE locked tokens. Many industry participants began marking those positions at the freely traded token price without appropriate consideration for the locked nature of their underlying holdings. 

Since the pronouncement, Houlihan Capital has consistently cautioned against that comparison, as it overlooked many aspects of both the underlying economics and mechanics of token restrictions. A market participant would not pay the same price for tokens that can be sold today and tokens that remain locked for months or years. Treating those positions as interchangeable overstates NAV and distort performance and fees, and creates inequities among investors subscribing or redeeming at values the fund could not actually realize. 

On July 1, 2026 – exactly four years and one day later – the FASB reversed course, issuing a proposed ASU that would require investment companies to consider contractual sale restrictions when measuring the fair value of restricted equity securities and to disclose the resulting discount. The proposal is not final and directly addresses equity securities, not locked tokens. However, the logic remains universal: fair value should reflect how market participants price an inability to monetize an investment. This remains consistent with the approach Houlihan Capital has applied to locked tokens from the start. 

What ASU 2022-03 Actually Changed 

ASU 2022-03 drew a line between restrictions imposed on the holder and restrictions embedded in the asset. A contractual lockup imposed on a particular holder was treated as a characteristic of the reporting entity and excluded from fair value. By contrast, a legal or embedded restriction that travels with the security and binds any holder remained an asset characteristic that should be reflected in fair value. 

The pronouncement was never a blanket prohibition on marketability discounts; nor was it written for cryptoassets. Extending its conclusion to every token lockup skipped the threshold question the guidance preserved: where does the restriction reside, and how would a market participant price it? 

Why Locked Tokens Are Different 

ASC 820 asks for the price that would be received in an orderly transaction between market participants at the measurement date. A freely tradable token and an otherwise identical token locked for twelve months may reference the same protocol, but they do not offer the same liquidity or risk profile. The buyer of the locked position remains exposed to volatility and risks without the normal ability to exit the position when desired. 

The length and structure of the restriction also matter. Longer lockups generally produce larger discounts, and the effect can be especially material for volatile cryptoassets. Vesting schedules add another layer: tokens released through cliffs or linear schedules are a series of future deliveries, not the economic equivalent of the full nominal quantity being liquid today. The analysis should consider unlock timing, remaining conditions, volatility, and realistic hedging alternatives. 

Some token restrictions are enforced at the protocol, smart-contract, wallet, or delivery level and bind any subsequent holder. Those restrictions travel with the asset and are naturally analyzed as asset characteristics. Others arise from contractual commitments by the fund not to sell. Even then, the economic question remains whether a market participant stepping into the position would demand a price concession. 

What the New Proposal Signals 

Admittedly, the July 2026 proposal does not fully resolve the issue created by the earlier pronouncement within the industry, as its direct scope is restricted equity securities held by investment companies while the final standard may still change. However, its acceptance that the exclusion of a contractual sale restriction can produce meaningfully different results from how market participants would actually value the investment. 

For crypto funds, that weakens support for a blanket P(rice) x Q(uantity) policy for cryptoassets, locked or not. Rather than being ignored by default, each discount will now vary based on its specific terms and economic effect. 

What Crypto Funds Should Do Now 

•  Identifyall locked and vesting token positions and document the remaining lockup period, release schedule, transferability, vesting conditions, and any acceleration or termination provisions.
•  Applyan appropriate marketabilityadjustment using a supportable methodology calibrated to the remaining lockup, vesting schedule, token volatility, release conditions, and realistic market-participant hedging alternatives. 
•  Strengthen valuation documentation and disclosures and coordinate the revised approach with fund management, administrators, auditors, and boards.

The Takeaway 

Houlihan Capital's position has been consistent: restrictions should be evaluated through the market-participant lens at the center of ASC 820. The proposal does not settle the accounting for locked tokens, but it moves the discussion back toward economic reality. A locked token should not be assumed to equal a liquid token merely because both reference the same quoted market price. Rather, restrictions must be considered and properly reflected whenever they apply. 

How Houlihan Capital Helps 

Houlihan Capital has been advising our clients on this methodology and other independent valuations for Level 3 assets that are unique to the cryptoasset industry since 2018. Houlihan Capital was recognized as the number one valuation provider three years running in the Accolade Partners Independent Survey for Crypto Fund CFOs. Our methodologies are designed to be transparent, repeatable, and supportable under audit and board review.

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